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Prentice Hall Economics Chapter 16 Sections 1-3 Vocabulary

STUDY
PLAY
monetary policy
the actions that the Federal Reserve System takes to influence the level of real GDP and the rate of inflation in the economy
reserves
deposits that a bank keeps readily available as opposed to lending them out
reserve requirements
the amount of reserves that banks are required to keep on hand
check clearing
the process by which banks record whose account receives money when a costumer writes a check
bank holding company
a company that owns more than one bank
federal funds rate
the interest rate that banks charge each other for loans
discount rate
the interest rate that the Federal Reserve charges commercial banks for loans
money creation
the process by which money enters into circulation
required reserve ratio
the fraction of deposits that banks are required to keep in reserve
money multiplier formula
a formula (initial cash deposit X 1 / RRR) used to determine how much new money can be created with each demand deposit and added to the money supply
excess reserves
bank reserves greater than the amount required by the Federal Reserve
prime rate
the rate of interest that banks charge on short-term loans to their best customers
open market operations
the buying and selling of government securities in order to alter the supply of money